Public-Private Partnerships

In 2015 I began as a graduate research assistant at the Center of Transportation Public Private Partnership Policy under the direction of Professor Jonathan Gifford. In 2017, I took over as program manager of the Center and remained on as a senior research associate.

As a result, I have a body of work and extensive knowledge on P3s. A public–private partnership (PPP or P3) is a contractual arrangement between two or more public and private sectors, typically of a long-term nature. P3s are primarily used in infrastructure provision, such as traditional transportation infrastructure (highways, roads, bridges, tunnels, airports, and ports) and social infrastructure such as the building and equipping of schools, hospitals, and utility systems such as water and sewerage systems.

P3s are undergoing a transformation, as they are being applied with greater frequency in new hybrid forms to new applications of telecommunications and transportation technology. Many cities and regions are facing deteriorating infrastructure; P3s are one tool to address these deficiencies. They are not a silver bullet to solve funding short falls or mismanagement, rather an opportunity to be inclusive and procure the best talent and expertise for the many challenges facing our cities. While the bulk of my P3 research has been on traditional infrastructure project, P3s overlap with the my research on smart cities. Smart cities will not be realized without P3s and/or public-private collaboration.

Paper Abstracts

Understanding Project Cancellation Risks in U.S. P3 Surface Transportation Infrastructure

Lauren N. McCarthy, Lisardo Bolaños, Jeong Yun Kweun, Jonathan Gifford

Presented at World Conference on Transportation Research 2019, currently under review

Abstract: Public private partnership (P3) projects can face many internal and external risks affecting their development and implementation. As a result, this research explores the understudied risk factors underlying the U.S.’ cancelled, deferred, and terminated (CDT) P3 projects. A database of CDT projects is developed. Of the projects identified as the U.S. surface transportation P3 population, 46% (31 out of 68) experienced cancellation, deferment or early contract termination. The research then applied a risk typology and a multi-case study method to the troubled cases to identify common risk factors. Data collection focused primarily on the identification of political (public and political voice, bureaucratic complexity) and economic risk factors. The most frequently identified factors across the 31 cancelled, deferred, or terminated cases include political opposition, local opposition, and inadequate demand projections. Since the paper studies the entire U.S. surface transportation P3 project population, the results serve to inform public agencies and private sector actors of possible friction points meriting consideration during P3 procurement planning.

Highlights:

· 46% of U.S. surface transportation P3 projects have been canceled, deferred, or terminated

· Project cancellations do not necessarily indicate inherent flaws in P3 projects or their deal structures, political risk drivers can simply overwhelm an otherwise viable project.

· Exogenous economic shocks play an important role in project cancelation with the findings suggesting some projects are flawed and cannot simply be made into a viable project by using P3 as a delivery method.

· Projects with high environmental risks are frequently subject to public and ideological opposition.

· Citizen engagement in the political process is influencing decision-making; In almost half of the projects where political voice was present, political actors justified actions by considering public actions.

Keywords: Public-Private Partnerships, Political Risk, Project Cancellation, Economic Risk, United States

U.S. Surface Transportation Public-Private Partnerships: Objectives and Evidence

Lisardo Bolaños, Morghan Transue, Porter Wheeler, Jonathan L. Gifford, Lauren N. McCarthy

Presented at Transportation Research Board 2018

Based on documentary sources and stakeholder interviews, public-sector P3 objectives across the six study cases primarily targeted cost reductions for the public sector and/or faster project completion times compared to traditional procurement, ultimately generating substantial improvements across most of the study cases.

In addition, public agencies effectively engaged P3 delivery approaches to:

1. Increase access to private sector expertise and innovation. For example, Texas’ LBJ TEXpress Lanes project achieved substantial cost reductions after the P3 procurement process enabled an alternative private sector design proposal. Pursuing private sector expertise and innovation early in the procurement process tended to generate the strongest outcomes.

2. Accelerate project delivery. Colorado´s US 36 Express Lanes case, for instance, employed a P3 approach to overcome the twenty-year funding delay expected under traditional procurement. P3 approaches similarly accelerated Virginia’s I-495 Capital Beltway HOT Lanes and I-95 HOV/HOT Lanes projects by at least six years, likely more.

3. Improve cost and schedule certainty. For instance, P3 approaches delivered Virginia’s I-495 and I- 95 projects on-time and within-budget. In cases with late delivery, P3 incentive structures – including more than $41 million in penalties for Florida´s Port of Miami (POM) Tunnel concessionaire – helped minimize delays. Cost certainty also proved important for preserving the Presidio Parkway project’s complex, multi-party consortium.

4. Manage project risks. Virginia, for example, transferred revenue risks to the private sector for its I- 495 and I-95 HOT Lanes projects. Florida, similarly, shared the POM Tunnel project’s geotechnical risks with the private sector. Strong emphases on risk-transfer objectives tended to produce the strongest outcomes, although political risk management remained underdeveloped in several cases.

5. Promote broader transit and development opportunities. The P3 approach enabled Colorado’s U.S. 36 Express Lanes project, for example, to transition from a highway project to a multimodal project including improved transit and bike facilities. Similar transit and local development objectives may prove especially beneficial for future projects.

The research also suggests that the public sector can improve P3 outcomes by: i. Providing comparative metrics for traditionally procured and P3-delivered projects. Confronted with traditional procurement challenges and limited knowledge regarding potential P3 benefits, citizens and decision makers would benefit from comparative performance metrics developed across state departments of transportation. ii. Providing citizen-friendly project information. Given P3 projects’ often sophisticated legal structures spanning many years, stakeholders, and processes, friendly and accessible communication approaches, as exemplified by California´s Presidio Parkway Phase II project website, can improve citizen engagement and public-sector accountability. iii. Promoting intergovernmental knowledge exchange. As surface transportation infrastructure projects become increasingly complex, governments should consider exchanging multi-agency process best practices to improve project delivery for both P3 and traditionally procured projects.